From plastic to skincare, P&G goes for cutting edge
It rolls out more tests, small projects on back of criticism that it is stodgy and bureaucratic
NEW YORK Procter & Gamble (P&G) survived a board showdown with investor Nelson Peltz earlier this week by persuading shareholders that the company has changed. Now it has to prove it.
Even after declaring victory in the proxy fight, P&G faces lingering scepticism that it can innovate and create a new generation of blockbuster products.
To demonstrate that the company has its mojo back, it is bringing items to market more quickly – and it is developing products via smaller and more frequent experi- ments. That includes changing its packaging. The company created a new film-based container for liquids that weighs half as much as regular plastic. It took only about six months to develop and is now being tested with Amazon.com.
P&G also hired a lingerie designer to create a more feminine-looking version of its Always Discreet absorbent underwear with lighter, softer fabric.
“It’s quite a shift,” P&G’s chief technology officer Kathy Fish said in an interview in Cincinnati.
Rolling out more tests and smaller projects – known as lean innovation – is producing results and generating insights that can be extended to other products, she said.
That may help counter criticism that the company is too stodgy and bureaucratic.
When Mr Peltz launched his bid for a board seat in July, he said P&G needed a simpler structure and had trailed its peers in performance in the past decade.
He has slammed the business for failing to keep up with changing preferences, saying younger shoppers want smaller brands with compelling stories behind them.
P&G has argued that sales growth is stronger when it is pinned to established brands that consumers recognise.
Still, everyone agrees the company needs to move faster. Traditional consumer-product makers have not kept pace with the shifting tastes of customers, said Morningstar analyst Erin Lash. “It takes them way too long to get a product from concept to shelf,” she said.
Acquiring smaller brands can give more established companies new ideas for getting products to market more quickly, Ms Lash said.
P&G is not averse to acquisitions, but they need to be profitable, chief executive officer David Taylor said in a recent interview. At any rate, customers have responded more intently to products linked to existing brands, he said.
For instance, P&G helped bolster its Unstopables laundry scents by adding the Downy brand name. The product line, introduced in 2011, now accounts for about a halfbillion dollars in sales each year, Mr Taylor said.
Other smaller projects also are producing results. Seed money allocated to one of P&G’s scientists led to the creation of a recycled plastic that can be used like new material. Normal recycled plastic has colour and other contaminants, so it is only good for limited use, Ms Fish said.
And P&G is testing new ways to incorporate technology into products. After releasing the Oral-B Genius toothbrush, which tells users how long and where to brush, the company is working on a version with additional capabilities.
In the skincare category, P&G is using a diagnostic online tool it created for its top-tier SK-II line to help it revitalise the mass-market Olay brand.
Mr Taylor said simplification of the company’s labyrinthine management structure – another area attacked by Mr Peltz – is also cutting time to market.
While Mr Peltz recommended that P&G be broken into three autonomous units, Mr Taylor believes local managers already have the power they need to respond to consumer trends.
P&G, which offers a diverse range of products, including Tide laundry detergent, faces scepticism that it can innovate and create a new generation of blockbuster products.